Page 16 - Tree Line - North Carolina Forestry Association - Fourth Quarter 2020

Newsprint
How have industry segments responded?
Pulp & Paper
Tissue & Towel
As a sense of fear and panic gripped
the nation in early March, tissue-and- towel demand went through the roof as hoarding behavior became the norm. In North America, about one-third of tissue consumption occurs away from home because we’re typically out and about. But when the world seemingly shut down at once, it triggered a significant change in the pulp-and-paper supply chain.
• Tissue availability became a real problem for most Americans as
states began mandated lockdowns in March. As a result, there was a shift as manufacturers of large, industrial-sized rolls of toilet paper for businesses such as hotel chains began moving their products through traditional retailers to create more inventory on the shelves.
• Despite the tough economic times, roughly 55% of at-home tissue
use in North America is in the “ultra-premium” category, which is astronomically higher than it was 15 years ago. That trend will likely continue despite economic
Printing & Writing
struggles; Americans will not regress in expectations when it comes to at-home tissue products.
• To meet demand, tissue manufacturers have been running at max capacity, which means delaying scheduled maintenance. As producers gain a clearer sense of retail trends going forward
(now that most of the hoarding behavior seems to have subsided), they will
catch up on deferred maintenance and the market should rebalance as we get further into the third quarter.
Since we are still without a vaccine and are largely unsure where we are in the lifecycle of the pandemic, we can’t be entirely sure where the tissue and towel industry will settle, i.e. producers staying ahead of market trends, retailers stocking excess inventories in distribution centers, etc. However, we should continue to see a structural change in near-term demand for certain formats such as dispenser napkins and hand towels, which are trending down as restaurants
and retail establishments operate under restrictions or remain closed altogether.
Printing & Writing
While the pandemic created strong demand for tissue and towel products, it will likely accelerate the decline of already struggling sectors of the pulp-and-paper sector. Demand for printing and writing papers and newsprint continues to decline
Tissue & Towel
rapidly as the digital age matures.
A recent piece via the Wharton School
of Business portends a dynamic that is likely to accelerate in the future as the workplace evolves: “Enabled by advances in technology, remote work has been gaining traction in the last decade. Research released last year from International Workplace Group, a flexible workspace provider, found that 83% of businesses offer, or are planning to offer, remote
work. The number of employees currently working from home under the social distancing guidelines demanded by the pandemic haven’t been counted officially. But anecdotally, it’s likely in the millions.”
And with school and university systems across the country now employing “distance learning” for the foreseeable future, tens of millions of K-12 and college students are doing their work online. All of this adds up to a situation where printing and writing papers are simply not needed to accomplish tasks and take tests.
Additionally, low-cost pulp production in Brazil and Indonesia has stymied any new capital inputs in the U.S. South hardwood market. At least three pulp mills have been converted away from hardwood production in the U.S. South over the last several years. Currently, there are simply no demand trends that indicate future growth for the hardwood pulp market, and this structural market change is accelerating under the weight of the COVID-19 pandemic.
North American Paper Production Trends
14 ncforestry.org / FOURTH QUARTER 2020